Accounting Online Program Accounting Basics 2

Question 1

Which accounting principle requires expenses to be recorded in the same period as the revenues they helped generate?

Accepted Answer

Matching principle

Answer

The matching principle ensures expenses are recognized in the same period as the related revenues, providing an accurate picture of profitability.

Question 2

What is the normal balance of a liability account?

Accepted Answer

Credit

Answer

Liability accounts carry a normal credit balance because liabilities represent amounts owed that increase with credits.

Question 3

A company purchases office supplies for $500 cash. Which entry correctly records this transaction?

Accepted Answer

Debit Supplies $500, Credit Cash $500

Answer

Purchasing supplies increases the Supplies asset (debit) and decreases Cash (credit).

Question 4

Which financial statement shows a company's revenues and expenses over a period of time?

Accepted Answer

Income statement

Answer

The income statement reports revenues, expenses, and net income or loss for a specific accounting period.

Question 5

What does the term 'going concern' assume about a business?

Accepted Answer

It will continue operating indefinitely

Answer

The going concern assumption presumes a business will continue operating long enough to fulfill its obligations and objectives.

Accounting Online Program Practice Test